This document outlines a draft of veD2D, a new tokenomics for PrimeDAO centered around the ve8020 launchpad by Balancer.
Background
When PrimeDAO, a collective focused on researching and building next-generation coordination tools for decentralized organizations, launched $D2D in December 2021, it aimed to create a network token that would curate, build, and control a suite of DAO products and services.
After building and incubating several products and services with various degrees of success, PrimeDAO’s initial funding from its H2 2021 Seed Round and LBP started to run out. In 2023, PrimeDAO continued to reduce its spending to a low in Q3 2023 while slowly exploring new products. Since then, on-chain activity has grown rapidly, and Prime contributors started building several products with PrimeDAO.
For Prime to progress towards its vision of becoming a headless brand that progresses DeFi towards a cooperative system - the $D2D token should play a more active role in curating and facilitating coordination. $D2D should make it attractive and rewarding for DAOs and teams to build and cooperate with PrimeDAO. The token should optimize for long-term, value-aligned contributions and governance that promotes cooperation.
Introduction to ve8020
The design is inspired by the existing tokenomics of Balancer and dozens of other projects, including AAVE and Radiant, which combines an 80/20 pool token with a Voting Escrow system to streamline governance, liquidity, and reward distribution.
Implementing ve8020 will leverage the ve8020 launchpad by Protofire and Balancer, for which PrimeDAO was a designer partner and helped shape the solution.
Proposed veD2D parameters
Network: Arbitrum
The veD2D system will run on the Arbitrum Mainnet, as this is the L2 with the most DeFi activity.
Input Token: 20% rETH / 80% D2D BPT
The 20% rETH / 80% D2D BPT token will be used as an input token for veD2D. Using a Balancer Pool Token containing rETH, each veD2D holder contributes to making D2D liquid and receives Staked ETH rewards from rETH.
Max Lock: 1 Year - Linear
The input tokens can be locked for a maximum duration of 1 year. The minimum lock duration is 1 week. veD2D power decreases linearly from the maximum lock duration. veD2D holders can increase their active lock duration at any point up to the maximum.
Early Unlock Penalty: Up to 50% - Linear
Each veD2D holder can unlock the input tokens by paying an early unlock penalty of up to 50% of their input tokens based on the duration of their lock. The unlock penalty will be sent back to the PrimeDAO Treasury.
Unlock All: Active
PrimeDAO will have an Unlock All function active that allows Prime governance, ideally through oSnap, to unlock all veD2D simultaneously in case PrimeDAO wants to change its tokenomics in the future.
Reward Distribution: 80% of LP rewards + share of D2D inflation
veD2D holders will receive 80% of rewards from the 20% rETH / 80% D2D pool and a relative share of D2D inflation. The 20% of LP rewards not distributed to veD2D holders will be used by PrimeDAO to increase its Balancer, Aura, and StakeDAO positions to reduce the costs of streaming rewards to the 20% rETH / 80% D2D pool. The D2D inflation should be voted on by PrimeDAO governance, deciding how much D2D shall flow to veD2D holders as a reward for their commitment and how much D2D will be used to bribe rewards to the pool.
Governance: PrimeDAO will continue to use Snapshot as its primary DAO voting solution. A new strategy fetching the current veD2D holdings will replace the existing ones fetching D2D holdings and LP positions. The new strategy will provide a more precise and transparent overview of PrimeDAO votes.
The proposal submission threshold would be raised to match the equivalent of 1M D2D worth of veD2D, while all other Snapshot parameters would remain the same.
Benefits of veD2D
When veD2D is implemented, it should bring various benefits to PrimeDAO stakeholders, including but not limited to the following:
Better value alignment between active stakeholders: By locking the 20% rETH / 80% D2D BPT tokens - Prime stakeholders commit to the growth of PrimeDAO and increase their skin-in-the-game, leading to more long-term alignment between contributors.
Improved governance and vote reliability: By having only one active voting strategy, voting power is more accurately measured, making voting more transparent and predictable.
A straightforward mechanism for Reward Distribution: veD2D creates a mechanism to reward active and long-term D2D contributors with, for example, D2D inflation rewards, product fee share, and potential retrospective rewards from spin-outs such as Inverter, SupremeDAO, and RegenerativeFi.
Risks of veD2D
The potential risks introduced by veD2D are:
Additional Smart Contract Risk: By using Balancer Protocol and the ve8020 launchpad, additional smart contracts are being used by PrimeDAO. The Balancer Protocol contracts are extremely battle-tested and considered safe, while the ve8020 launchpad contains relatively little new code and is audited as part of the Balancer Grant.
Potential impermanent loss: By utilizing the BPT as the input token, there is some risk of impermanent loss if the price of rETH and D2D diverges. Due to the 80 / 20 pool design, however, these effects are greatly minimized.
Timeline and next steps
The audited version of the ve8020 launchpad is projected to be released in the second half of January. We aim to launch within three weeks of the launchpad going live.
We proposed putting a final veD2D configuration proposal up for a vote by the end of the second week of January to accomplish this timeline. This means we have about two weeks to gather and implement stakeholder input.
If you’re a D2D stakeholder, please leave your thoughts and recommendations on this thread.
After the deployment of veD2D, PrimeDAO and Inverter will continue to iterate on the ve contracts and turn them into Inverter modules, as indicated in the Inverter Q1 proposal, to make the ve system more robust and flexible.